Federally-regulated lenders cannot lend more than 80% of a home’s value without the borrower gettingmortgage insurance
. But a few banks have developed a way around that.
What they do is loan the borrower 75-80%loan-to-value
as a first mortgage. Then they facilitate a 5-10%LTV
second mortgage with a separate private lender.
This allows for financing totalling 85% LTV with no insurance fee.
a division of Canadian Western Bank, had just such a product—until
recently. It was called the Opti-85 Bundle, and here’s why it was pulled
from the market.
August 30, 2013
Rate Hikes and Housing: TD Research
In just a few short months, long-term mortgage rates have burst higher by almost ¾ of a percentage point.
People naturally want to know if the hikes are sustainable, and how they’ll affect the overall housing market.
TD Economics weighed in on these points in a report last week. Here’s
a quick overview of the implications TD foresees, and some observations
of our own…
- Future Rates: TD projects a 2.25 percentage point
jump in 5-year bond yields by 2017.
As many as85%
are choosing fixed rates, saysCAAMP
. It makes you wonder, what is it going to take to get that number back to its historical average of ~65%?
For one thing, the fixed-variablespread
(i.e., difference between fixed and variable rates) needs to widen.
With today’s typical 5-year fixed at 2.84% and discounted variables at
2.45%, that spread is currently ~39basis points
As a rough rule of thumb, when the fixed-variable spread hits 100
basis points, demand for variables noticeably increases.
A wide majority of first-time buyers-to-be plan to put down less than 20%, according tonew data
Here's the breakdown of their expected down payments:
- 10% or less (62%of respondents)
- 11-20% (26% of respondents)
- More than 20% (12% of respondents)
Over half of newbie homeowners will likely pay the maximumdefault insurance
premium to buy their home.* That maximum ranges from $2,750-$2,900 per
$100,000 of purchase price (i.e., 2.75%-2.90%), depending on the source
Those rule changes also eliminated high-ratio refinances and
contributed to a 15% drop in housing sales last quarter versus Q1 2012.
Genworth CEO Brian Hurley spoke today onBNN
about the pulse of the market. Here are some of his insights of note (our comments initalics
- As an insurer, "We make money by getting the risk right." That means "We've got to get the properties right," he told BNN.
Federal policy-makers are exploring additional mortgage rule tightening, CMT has confirmed.
A spokesperson from Canada’s banking regulator, The Office of the Superintendent of Financial Institutions Canada (OSFI
), verified that it is looking at the issue of limiting amortizations to 25 years onconventional mortgages
(those with 20%+ equity). Currently, those “low-ratio
” mortgages can haveamortizations
up to 35 years.
OSFI is “doing some preliminary consultation with financial institutions” on the matter, said the spokesperson.
On Friday, Manulife Bank posted its lowest rate ever on a 5-year fixed mortgage, 2.89%. It lasted for four days.
When our big brothers at theDepartment of Finance
(DoF) caught wind of it, they dialed up Manulife and swayed the bank into raising its rate back to 3.09%.
“We don’t want a race to the bottom on mortgage rates by our
financial institutions…,” said Finance Minister Jim Flaherty, as quoted
. “I had one of my staff call (Manulife) and indicate my displeasure.”
Manulife responded today by saying:
"After consulting with the Department of Finance, Manulife Bank has
withdrawn the (2.
Canadian macro-economists are mostly in agreement that theovernight rate
should go nowhere in the next 9-12+ months. And theBank of Canada
gave no indication today that such projections are off the mark.
The Bank left Canada’s core lending rate unchanged at 1% for the 29th straight month, with no change in sight.
Part of the Bank’s reasoning is reflected in thesecomments
from its statement:
- “Total CPI inflation has been somewhat more subdued than projected
in the January MPR as a result of weaker core inflation and lower
mortgage interest costs.
Author:Rob McLister, CMT
Published: January 28, 2013
Link to original article provided below
Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ranthis report
The gist of it is thatcollateral mortgages
"effectively trap you at the bank," says the CBC (which is not entirely true… more on that below).
TD Canada Trust, which sellsonly
mortgages, was caught in CBC’s crosshairs. An undercover reporter went
into a TD branch with a hidden camera, asking the mortgage rep what made
TD mortgages different than those at other banks.
Link to original article at bottom of page.
Author:Rob McLister, CMT
If you want to know what’s moving Canadian mortgage rates, watch the American news.
The reason? Canadian bonds are 95% correlated with American bonds
(Treasuries) and bond yields are 97% correlated with 5-year fixed
mortgage rates. (See:Yields and Fixed Mortgage Rates
In other words, Canadian rates are married to U.S. rates. So it’s no
wonder that our mortgage rates are being shifted by things like the U.S.debt ceiling